President Barack Obama signed the American Taxpayer Relief Act of 2012, often called the “fiscal cliff” agreement, on January 2, 2013. Buried in the 59 pages of the act is a seven-line amendment to Section 1870 of the Social Security Act. This section bars recovery of overpayments from providers who are “without fault” and automatically deems a provider to be without fault three years from the year in which the original payment was made (unless there is evidence of fault). The three-year “without fault” limitation provision was enacted in 1972. Without much notice, the fiscal cliff deal extended this to five years.

The push for extension of the limitation began when the Department of Health and Human Service’s Office of Inspector General (OIG) issued a report recommending to the Centers for Medicare & Medicaid Services (CMS) that it pursue legislation to extend the statute of limitations. (See OIG, Obstacles to Collection of Millions in Medicare Overpayments.) This report blamed the time limitations on reopening and recovery of payments (four years and three years, respectively) as the reason why approximately $330 million in overpayments could not be recovered by CMS. The OIG also concluded that CMS’ inadequate guidance and monitoring of contractors was to blame. The Congressional Budget Office (CBO) has issued a report estimating that $500 million would be added to the federal treasury by 2022 as a result of the statute of limitation change. (See CBO, Detail on Estimated Budgetary Effects of Title VI.)

The biggest question for providers is how to deal with this change going forward. The following illustration demonstrates how the three-year limitation period applied: Provider was notified on February 22, 2009, that it had been paid for services provided to beneficiary. On January 2, 2013, the contractor determined that provider was overpaid for these services. If there was no evidence that provider acted fraudulently, this overpayment could not be recovered because under the statute of limitations the right to do so expired on December 31, 2012. Had the contractor determined that the provider was overpaid on any date prior to December 31, 2012, it would have been recoverable. (See Medicare Financial Management Manual, Chapter 3, Section 80.1.) Accordingly, any payments made in 2009 or before were not recoverable as of January 1, 2013.

On January 31, 2013, the Centers for Medicare & Medicaid Services (CMS) announced the health care organizations selected to participate in the Bundled Payments for Care Improvement initiative (“BPCI”).  BPCI was created by the Affordable Care Act (“ACA”) healthcare reform law to assess whether bundling payments for services in a single episode of care can…

On January 17, 2013, the Office for Civil Rights of the U.S. Department of Health & Human Services issued its final rule modifying the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy, security, enforcement, and breach notification rules under the Health Information Technology for Economic and Clinical Health (HITECH) Act. The final rule…

Pediatric critical care transport teams at the Alfred I. duPont Hospital for Children in Wilmington, Delaware participated in a study using iPads to communicate about the patient’s condition prior to and during transport.  The study, which was funded by the Nemours Fund for Children’s Health, found that use of iPads provided better communication between the transport…

The Long-Awaited HIPAA Omnibus Rule was just issued by HHS.

Brown McCarroll is reviewing the  563 page prepublication version of the new HITECH Act rules.  Of importance, there are new requirements for business associates and their subcontractors , as well as significant changes for hospitals and health systems, including provisions requiring changes to the Notice…

Recently, the U.S. Department of Health and Human Services (HHS) announced a settlement with the Hospice of North Idaho (HONI) for potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule.  The settlement, which was for $50,000, is unique because it is the first settlement involving a breach of electronic…

A recent report by the Office of Inspector General for the Department of Health and Human Services (OIG) concluded that in Fiscal Year 2010, 61% of Medicare providers that appealed CMS payment decisions were fully successful in their respective appeal.  In other words, these providers persuaded the Administrative Law Judge (ALJ) handling the appeal to completely overturn previous adverse payment decisions made by CMS and its contractors.  Notably, of the 61% of providers that were successful, those appealing Part A and B claims had the most success, 67% and 59% respectively.

The Medicare overpayment appeal process consists of four levels.  At the first level of appeal, which is available after an initial overpayment determination, the individual or entity (appellant) appeals the overpayment decision to CMS’s Medicare Administrative Contractor.  If the appellant is unsuccessful, the next appeal is administered by CMS’s Qualified Independent Contractor (QIC).  The third level of appeal is administered by the ALJ, and the fourth level is administered by the Medicare Appeals Council.  OIG’s report contrasted the high success rate at the ALJ level to the low 20% success rate at the QIC level.  While there are many reasons for the difference, OIG’s report found that the main reason is that ALJs tend to view Medicare’s reimbursement and coverage policies less strictly than CMS’s contractors.  OIG also found that CMS participated in only 10% of all ALJ appeals, which resulted in the ALJ overturning CMS’s decision in 60% of these cases.

In response to the deadly incidents with a compounding pharmacy in Massachusetts that is blamed for a meningitis outbreak that sickened more than 500 people and caused at least 36 deaths, potential federal legislation has been introduced in the U.S. House of Representatives.  Two bills have been introduced in the U.S. House of Representative that…

The California Supreme Court has agreed to hear a case to decide this issue (Fahlen v. Sutter Central Valley Hospitals, 208 Cal. App. 4th 557 (2012)).  The case pits the sometimes adverse interests of physicians against the interests of hospitals when employment and practice privilege issues collide.  Physicians who allege their privileges have been terminated in retaliation for blowing the whistle do not want to wait to file a whistleblower case until all administrative and judicial remedies concerning their clinical privileges are exhausted.  On the flip side, hospitals do not want to fight physicians on two fronts: in court and in the hospital’s own peer review process with the potential for judicial review.

The hospital in the case, Sutter Central Valley Hospitals, declined to renew the physician’s privileges after peer review proceedings, and that determination was upheld by the hospital’s board.  While the physician, Dr. Fahlen, might have been able to challenge that decision in court, he chose to file a lawsuit against the hospital with a number of claims, including claims under California’s whistleblower protection law (Cal. Health & Safety Code Section 1278.5, subd. (a)).  Dr. Fahlen claims that he lost his privileges as retaliation for blowing the whistle on dangerous nurses.